Brown Bag Seminar – May 2024

Title: “International climate finance: has it been effective?”

Speaker: Lucille Neumann Noel, postdoctoral researcher at Università Bocconi

Abstract: The literature has long tried to answer the question of the effectiveness of foreign aid in promoting growth among its recipients. In recent decades, foreign assistance has targeted new objectives and specifically climate objectives. How effective has it been in tackling these new challenges? In the United Nations Framework Convention on Climate Change (UNFCCC) in 1992, international climate transfers to developing countries are described as a necessary tool for addressing both the threat of climate change and the call for international climate justice. In this paper, we investigate two empirical strategies to estimate the effect of international public climate finance on sectoral GHG emissions, focusing on the technique effect of these transfers. We further assess the capacity of climate finance to diffuse less carbon-intensive technologies and production practices in the recipient countries’ economies through intermediary outcomes such as energy mix and intensity, green technology transfers and agricultural practices. To do so, we use the OECD-DAC public climate finance data from 2000 to 2020, covering 155 recipient countries. We first estimate a panel model using the instrumental variable two-stage least squares technique with a shift-share instrument to address climate transfers endogeneity. We then propose a staggered difference-in-differences setup comparing small and large recipients at the sectoral level and using heterogeneity-robust estimators. This strategy accounts for heterogeneity in climate transfers’ effects related to the time and length of their allocation. Our preliminary estimations converge to the absence of an effect of international public climate transfers on the recipient countries’ emissions. This result holds when considering different subsamples of recipient countries and is consistent across different accounting definitions of climate transfers.

More details soon.